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Overtime rule whiplash leaves businesses in a daze

How’s that for an abrupt halt? After businesses spent months preparing for the new federal overtime rule, a court decision put the brakes on everything just days before it was to take effect.

When the news broke on Nov. 22, many business leaders likely felt conflicted over whether they should to cheer or cry.

Over the last year, the rule had drawn criticism due to the fact that it created significant new workforce costs for many businesses. The rule’s main provision would have required employers to pay salaried workers at least $913 per week if they wanted to avoid paying overtime. That amounted to a huge increase over the current salary threshold of $455 per week.

Kat Cunningham, president of Moresource Inc.

So when U.S. District Judge Amos L. Mazzant issued his injunction — which many believe will cause the rule to never go into effect — you would think employers would have celebrated the chance to avoid those expenses.

The problem is nearly all employers had begun working toward complying with the rule.

For companies that couldn’t afford to raise wages, many had already met with impacted employees, altered schedules and reduced workloads to help ensure those staff members could stop working more than 40 hours per week.

It’s not easy to undo those preparations, increasing workloads and asking staff members to begin working longer hours again.

The situation is even trickier for employers that chose to give raises in order to meet the rule’s $913 per week threshold. Many didn’t wait until December to begin phasing in the raises. Given the judge’s injunction, should they now inform employees that they are going to switch back to their old compensation levels?

Most employers aren’t going to feel comfortable simply pushing rewind on all they’ve done — such a move might save money but would also torpedo employee relations and job satisfaction.

There’s also the unlikely threat that the rule could still somehow go into effect. Many people think that the judge’s injunction will cause the rule to be tied up in the legal system long enough for President-elect Donald Trump to repeal it before the courts make a final decision.

However, it’s difficult to predict how that will actually play out. Trump has spoken out against the overtime rule, however some of his most specific comments on the rule related to finding a way to exempt small businesses from its provisions.

So while it’s reasonable to expect Trump will dump the rule, we don’t know that for sure.

This has left impacted businesses simply trying to avoid any more regulatory whiplash. There’s no perfect approach to this and much of what businesses should do needs to be tailored to each situation.

The best tactic today is simply to stay on top of this as it develops and use your long range planning tools to try to turn today’s unexpected challenges into something that can make sense in the future.

And as we collectively look down the road, we should all expect that the Trump administration will enact significant compared to what we’ve seen over the past eight years. Dumping or altering the overtime rule is likely just the start.

We consistently push out updates on federal regulations on our moresource-inc.com website. Visit us online or give me a call if there is more we can do to make sure your company stays standing tall even as the regulatory grounds continue to shift.

Kat Cunningham is president of Moresource Inc. Contact Moresource at 573.443.1234.